Risk management is concerned with the conservation of a firm's assets and earnings power against risks of accidental loss.
Risk management is that branch of management concerned with:
(a) Total destruction through accident.
(b) Safe guarding the firms continued ability to earn in the face of possible accidental loss that could curtail or prevent continued earnings.
(c) The planning and supervision of non-insurance treatment of risk
i.e. outright intentional non-insurance, and funded self insurance programmes.
(d) When losses occur, minimising their effect within the insurance function by supervising prompt and proper settlement or defenses and, outside of the insurance function, by supervision of previously
planned emergency and catastrophe programmes.
Risk management by expert in that field should be concerned with:
(a) Examination of physical assets by those qualified such as engineers and safety specialists, under the general supervision of the risk manager.
(b) Examination from the risk view point of contracts, leases warranties
etc. in conjunction with the firm's solicitors.
(c) Evaluation of future earnings power in conjunction with top management, the firm's accountants, economists, and research and development staff.
(d) Evaluation and, where necessary ultimately, development of the firm's risk abatement and loss prevention programme.
Insurance Management
Insurance management is that part of the risk management function that concerns itself on a technically trained and professional level, with the post-evaluation of transfer of risk or with the scientific self-insurance of the risk, and with the resulting effect of that transfer or self insurance. It is the liaison between buyers of insurance for business needs and the
seller i.e. the insurance industry.
The categories of risk management that fall within the insurance management function are:
(a) Knowledgeable and aggressive negotiation with insurance carriers
(or with agent or broker) insurance commission, by technically trained professional whose prime interest is the benefit of the company. This means purchasing (rather than selling) insurance
protection and the minimising of existing and prospective risks.
(b).
In conjunction with the legal staff or outside solicitors, the indemnification for damages sustained by the company through acts of others. Supervision of collection of claims from insurers.
(c) Maintenance of records of premium, cost and loss statistics for negotiation of renewals of coverage and for periodic review to determine the soundness of buying insurance versus self insurance
versus non-insurance.
(d) Continual surveillance of the part of the insurance industry dealt with by the company, to avoid over-insurance, under-insurance, human error, omission and possible negligence.
(e) Continual awareness of developments in the entire insurance field which might afford the company better coverage, better rates, or better methods of reducing or eliminating risks.
Where needed, development of sound self-insurance programmes and their supervision.
(f) The rendering of complete accurate and concise reports to appropriate members of management concerning the company's
insurance programme.
Generally, modern insurance management function is limited to property insurance, liability insurance, workmens compensation, marine insurance and suretyship.
In every aspect of life there exist risk. Even mere taking of a step from a standing point to another carries its own risk. Making plans to manage and maintain risk is necessary in business if such business still want to be active in the market.
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